Supplier diversity has long surpassed the “need to have” concept. With 69% of large companies gearing up to diversify their supply chains, now it has become the key value driver for creating meaningful impact while maximizing ROI. A recent study reveal that integration between Environmental, social and governance (ESG) and supplier diversity helps drive business value for over 55% of companies.
The same thing goes for diversity and inclusion (DE&I) goals— a company’s supply base is an extension of its workforce and should be tracked against its diversity metrics and goals.
Synergy of Inclusive Procurement and DE&I Strategies
As companies continue to polish their workplace diversity and inclusion policies, DE&I leaders are also finding ways to promote diversity through every line of business. Along with focusing on internal diversity goals, enterprises also aim to include supplier diversity in their corporate DE&I goals.
The impact is truly commendable! Did you know that minority business enterprises have been responsible for over 50% of new businesses in the U.S.? According to the U.S. Senate Committee on Small Business and Entrepreneurship, they have created a remarkable 4.7 million jobs, and more than 4 million diverse businesses collectively generate an astonishing $700 billion (about $2,200 per person in the US) in annual revenue today.
However, there is still a large difference in several of the economy’s fastest-growing sectors. As the United States transitions to a professional services economy, these industries are experiencing remarkable growth. Organizations, society, and the economy would greatly benefit from closing the supplier diversity gap in these and other professional services industries.
In this blog, we’ll discuss bridging this gap by shining a spotlight on supplier partnerships with minority- and women-owned businesses (MWBEs) in specific industries.
The New Norm: Supplier Diversity as a Competitive Advantage
Over the last few years, supplier diversity perceptions have dramatically evolved globally. It’s shifted from a mere symbolic gesture to a fundamental expectation among investors, customers, and employees.
When around 95% of businesses were affected by supply chain disruptions during the pandemic, smaller, minority-owned, diverse suppliers emerged as essential saviors. Their agility and responsiveness, particularly with last-minute requests, set them apart from their larger counterparts. This highlights how MWBEs bring innovation and substantial benefits to large companies during crises. For instance, with an innovative solution, V2Soft, a minority-owned IT services firm, significantly boosted an automotive manufacturer’s online sales by 10-15%.
The US government is also doubling on supplier diversity to emphasize things more. The Department of Commerce made the Minority Business Development Agency permanent in 2021 and expanded its mission to coordinate and collaborate with MWBEs.
Today, with 97% of major organizations committed to ESG principles— supply chain diversity and social responsibility are no longer choices. Ignoring supplier diversity is a luxury, organizations can no longer afford. Having a diverse yet nimble supplier base enhances resilience and gives you the much-needed competitive advantage, which is crucial in today’s business landscape. Leading companies understand this and have already pledged over $50 billion to partner with MWBEs over the next decade.
Driving Tangible Value with MWBRs Partnerships
MWBRs have proved their mettle time and again when it comes to creating positive economic impacts. They provide their corporate partners with 8.5% YOY expense savings— a significantly higher annual procurement savings than most organizations realize! An McKinsey assessment of 76 MWBEs found that they hire 67% more minorities than the US average and more at the highest ranks.
Corporations have even greater potential to generate tangible value and contribute significantly to global sustainable economic growth. Surprisingly, some high-growth sectors (such as IT, real estate, insurance, transport & manufacturing) remain low priorities for even the most mature supplier diversity programs.
Finance, IT, legal, and engineering sectors still have underrepresented minority participation. By expanding supplier diversity and prioritizing minority-owned businesses, we can create stable, high-wage jobs while simultaneously promoting innovation and resilience.
Combining supplier diversity with corporate DE&I and sustainable matrices in your supply chain program brings numerous advantages internally and externally. Apart from innovations, cost savings, risk management and societal impact, partnering with minority-owned businesses solidifies your organization’s commitment to diversity, equity, and inclusion in all aspects of your business verticals. It strengthens your company’s impact and presence among diverse communities. What’s more, it fosters goodwill and creates a positive brand reputation.
In the end, it’s not about checking a box or exceeding expectations in quarterly or annual reports. It’s about optimizing business performance, enhancing supply chain competitiveness, and collectively building a more sustainable and inclusive future– a world our future generation would be thankful for.